Judge: Serena R. Murillo, Case: 23STCV11510, Date: 2023-09-27 Tentative Ruling
Case Number: 23STCV11510 Hearing Date: September 27, 2023 Dept: 31
TENTATIVE
Defendant’s demurrer is OVERRULED
in part and SUSTAINED in part. The demurrer to the causes of action for breach
of implied in fact contract and negligent misrepresentation is overruled. The
demurrer to the cause of action for intentional misrepresentation is sustained
without leave to amend.
Legal Standard
A demurrer for sufficiency tests
whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)
When considering demurrers, courts read the allegations liberally and in
context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216,
1228.) The court “treat[s] the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law
….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525).) In a demurrer
proceeding, the defects must be apparent on the face of the pleading or via
proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994).)
A demurrer tests the pleadings alone and not the evidence or other extrinsic
matters; therefore, it lies only where the defects appear on the face of the
pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) The
only issue involved in a demurrer hearing is whether the complaint, as it
stands, unconnected with extraneous matters, states a cause of action. (Hahn,
supra, 147 Cal.App.4th at 747.)
Meet and Confer
The demurrer and motion to strike are
accompanied by the declaration of Jonathan M. Starre, which satisfies
the meet and confer requirement. (Code Civ. Proc. § 430.41.)
Discussion
Defendant
demurs to the second through fourth causes of action for breach of implied in fact contract;
negligent misrepresentation; and intentional misrepresentation.
I.
Second Cause of Action for Breach of
Implied in Fact Contract
Defendant argues that
the second cause of action for breach of implied in fact contract is
duplicative of the first cause of action for breach of oral contract, in that
they both concern the same offer, acceptance, consideration, alleged harm and
primary right. Because the second cause of action fails to plead an implied in
fact contract, Plaintiff fails to plead sufficient facts to alleged a breach of
implied contract. Plaintiff
would have to allege conduct by Alvand from which a non-express promise to perform
might be implied. Plaintiff alleges no such facts, and thus, fails to allege a
cause of action.
The
elements of a cause of action for an implied-in-fact contract are the same as
those for a written contract, the difference being that the agreement is
“manifested in conduct rather than expressed in words.” (Maglica v. Maglica (1998) 66 Cal.App.4th
442, 455.)
Plaintiff
argues that the breach of oral contract and the breach of implied in fact
contract causes of action are not duplicative because the cause of action for
breach of implied in fact contract is based on a different theory of recovery.
To the extent that the jury does not find an oral contract, it can still find
an implied contract based on the parties’ conduct. Under California law, there are grounds
for a demurrer to a cause of action that adds nothing to the complaint by way
of fact or theory. (Award Metals,
Inc. v. Superior Court (1991)
228 Cal. App. 3d 1128, 1135.)
Further, Plaintiff
argues that the complaint alleges that Plaintiff
worked on and won the Amtrak contract for Defendants. (Compl., ¶¶ 11-20.)
The Court finds that
the complaint alleges sufficient facts to state a cause of action for breach of
implied contract. While Defendant argues that Plaintiff is basing his cause of
action based on the express promise, elsewhere in the complaint Plaintiff alleges
that Plaintiff worked on and
won the Amtrak contract for Defendants, (Compl., ¶¶ 11-20), which would show a
contract based on conduct. When considering demurrers, courts read the allegations
liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and
Power (2006) 144 Cal.App.4th 1216, 1228.) Further, it is not
duplicative because it is based on a different theory of recovery.
As such, the
demurrer as to the second cause of action for breach of implied contract is
overruled.
II.
Fourth Cause of Action for Intentional Misrepresentation
Defendant next argues
that Plaintiff’s intentional misrepresentation cause of action is duplicative
of his cause of action for promissory fraud.
The elements of
fraud are: “(a) misrepresentation (false representation, concealment, or
nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to
defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting
damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including negligent
misrepresentation, must be pled with specificity. (Small
v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff
plead facts which show how, when, where, to whom, and by what means the
representations were tendered.” (Cansino v. Bank of America (2014) 224
Cal.App.4th 1462, 1469.)
The cause of action for intentional misrepresentation is duplicative of
the cause of action for promissory fraud. The misrepresentation alleged is the
same (Compare compl., ¶ 50 with ¶ 55); the reasonable reliance is the same
(Compare ¶ 51 with ¶ 58); and the resultant damage is the same (Compare ¶ 52
with ¶ 60).
A demurrer is appropriate when “an alleged cause of action adds nothing
to the complaint by way of fact or theory of recovery, containing only
allegations of other causes of action.” (Cisco
Systems, Inc. v. STMicroelectronics, Inc. (2014) 77 F.Supp.3d 887, 896; see
also Rodrigues v. Campbell Industries (1978)
87 Cal.App.3d 494, 501 [sustaining, without leave to amend, demurrer to a cause
of action entirely duplicative of preceding causes of action].)
Here, the fourth cause of action for intentional misrepresentation adds
nothing by way of fact or theory. Plaintiff has not responded to this argument.
As such the demurrer to the fourth cause of action for intentional
misrepresentation is SUSTAINED without leave to amend.
III.
Intentional and Negligent Misrepresentation Causes
of Action
Defendant next argues
that the negligent and intentional misrepresentation claims fail because
Plaintiff does not allege an actionable representation of fact. Each of Plaintiff’s three fraud-type
causes of action are premised on the same allegation that Alvand promised to
pay Plaintiff while harboring a secret intent not to pay Plaintiff. However, a
disingenuous promise to pay is not a representation of material fact, and it
therefore cannot sustain a cause of action for either negligent or intentional
misrepresentation.
Defendant argues that actionable
misrepresentations must pertain to past or existing material facts. Statements
regarding future events are deemed to be mere opinions which are not
actionable. Promissory fraud, however, is different. It is the one species of
(non-fiduciary) fraud which regards a statement about the future due to the
special nature of the statement because promises concern future acts and are by
law and culture to be relied upon in reasonable circumstances. A
misrepresentation that constitutes promissory fraud is not demurrable on the
ground that it involves a representation regarding a future event. (Miles v.
Deutsche Bank Nat'l Trust Co. (2015) 236 Cal.App.4th 394, 402-03.)
Plaintiff argues that in Miles,
supra, 236 Cal. App. 4th 394 the trial court had sustained a demurrer to
fraud and negligent misrepresentation claims, like the ones asserted by
Plaintiff in this case. Like Defendants in this case, the defendants in Miles
argued that a “misrepresentation cause of action does not lie where the
misrepresentation pertains to future events....” (Id. at 402.) The Court of
Appeal disagreed and reversed the trial court order sustaining the demurrer.
The Court of Appeal held that the negligent and intentional misrepresentation
are properly pled if they are based on “a promise of future performance with no
present intent to actually perform.”
Plaintiff argues here, as in Miles,
Plaintiff’s negligent and intentional misrepresentations claims are based on “a
promise of future performance [i.e. payment of profits] with no present intent to
actually perform.” (Compl.
¶¶ 45, 50.)
In reply, Defendant appears to agree with
this principle. But Defendant argues that the intentional misrepresentation
claim is duplicative of the promissory fraud claim. As discussed above, the
demurrer is sustained without leave to amend on this basis. As to the negligent
misrepresentation claim, in reply, Defendant argues that an additional defect
is apparent. Defendant argues that the legal conclusion that Defendant made his
representation negligently contradicts the express factual allegation that Victor
never intended to uphold the alleged bargain. However, Defendant may not raise
arguments for the first time in the reply. Plaintiff has not had an opportunity
to respond to these arguments.
The demurrer is OVERRULED as to the
negligent misrepresentation cause of action.
IV.
Does the Economic Loss Rule Bar the Third Cause of Action
for Negligent Misrepresentation?
Defendant
lastly argues that the economic loss rule bars Plaintiff’s cause of action for
negligent misrepresentation.
“Quite
simply, the economic loss rule ‘prevent[s] the law of contract and the law of
tort from dissolving one into the other.’” (Robinson Helicopter Co.,
Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (Robinson Helicopter).)
However, tort damages may be permitted when the breach of contract is
accompanied by a tort such as fraud. (Id. at pp. 989-990.)
“Tort damages have been permitted in contract cases . . . where the contract
was fraudulently induced. [Citation.]” (Erlich v. Menezes
(1999) 21 Cal.4th 543, 551-552.) To plead around the economic loss rule,
a party must plead the existence of a duty that arises independent of any
contractual duty and independent injury, other than economic loss, that arises
from the breach of that duty. (Robinson Helicopter, supra, 34
Cal.4th at pp. 988-991.)
Plaintiff argues that the economic
loss rule does not bar Plaintiff’s negligent misrepresentation claim because
Defendants had an independent duty not to fraudulently induce Plaintiff’s
performance.
Defendant acknowledges in reply
that the economic loss rule does not bar tort claims arising from the parties’
contractual relationship in cases of fraud, because independent of the parties’
contractual relationship, parties have a separate right in tort not to be
deceived, which does not arise from the contract. (Sheen v. Wells Fargo
Bank, N.A. (2022) 12 Cal.5th 905, 922.) However, Defendant argues that
reasoning does not apply to a negligent misrepresentation claim, which by
definition, is not rooted in deceit.
But Defendant
cites to no authority for this argument. Moreover, the elements for negligent misrepresentation are
the same as fraud, except for the second element. “The¿elements¿of¿common¿law¿fraud¿in
California are (1) a misrepresentation of a material fact (false
representation, concealment, or nondisclosure); (2) knowledge of falsity; (3)
intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5)
resulting damage.” (Collins
v. eMachines, Inc.¿(2011)
202 Cal.App.4th 249, 259 [internal citation omitted].) “The elements of negligent misrepresentation are the same
except for the second element, which for negligent misrepresentation is the
defendant made the representation without reasonable ground for believing it to
be true.” (West v. JPMorgan Chase Bank, N.A.¿(2013)
214 Cal.App.4th 780, 792 [internal citation omitted].)
The demurrer is OVERRULED on this
ground.
Conclusion
Based on the foregoing, Defendant’s
demurrer is OVERRULED in part and SUSTAINED in part. The demurrer to the causes
of action for breach of implied in fact contract and negligent
misrepresentation is overruled. The demurrer to the cause of action for
intentional misrepresentation is sustained without leave to amend.
Moving party is
ordered to give notice.